Amicus Curiae Brief — Reebok Internationale Ltd. v. Banque Internationale A. Luxembourg S. A.

iit riLti ( ie

ANG 2.8 1985

No. 95-85

In The

Supreme Court of the United States

October Term, 1995

+

REEBOK INTERNATIONAL LTD. and

REEBOK INTERNATIONAL LIMITED,

Petitioners,

BANQUE INTERNATIONALE A LUXEMBOURG, S.A.,

Respondent.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

e

MOTION FOR LEAVE TO FILE OUT-OF-TIME

BRIEF OF AMICUS CURIAE

AND

BRIEF OF AMICUS CURIAE IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI

¢

JOHN R. ReeEse*

Respecca A. LENABURG

FRANK B. KENNAMER

McCutcHen, Doyte, BROWN

& ENERSEN

Three Embarcadero Center

San Francisco, California 94111

(415) 393-2000

Attorneys for Amicus Curiae

International AntiCounterfeiting

Coalition

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

y

BEST AVAILABLE COPY JESS

nie eed

sili iit i

MOTION FOR LEAVE TO FILE

OUT-OF-TIME BRIEF OF AMICUS CURIAE

The International AntiCounterfeiting Coalition

(“IACC”) respectfully moves this Court for leave to file

out-of-time the IACC’s amicus brief in support of the

petition for writ of certiorari sought by Reebok Interna-

tional Ltd. and Reebok International Limited.

Petitioners consent to the filing of this brief. Respon-

dent refused to consent, stating that the brief is untimely

under Rule 37.2.

The brief is untimely and we beg the Court's indul-

gence. McCutchen, Doyle, Brown & Enersen, counsel for

the IACC, were not engaged in this matter until August 9,

1995, and we were advised that an amicus brief would be

due on August 28, 1995. Although the writ petition is

dated July 17, 1995, so that respondent's brief in opposi-

tion ordinarily would be due on or about August 18,

1995, we were aware that respondent’s time to file could

be enlarged under Rule 15.2 in conjunction with Rule 30.

It was only on August 23rd, upon trying to secure the

necessary consent to file the attached brief, that we real-

ized that our understanding of the due date was mis-

taken. The next day, August 24th, we sent our brief, and

this motion, to be printed and lodged with the Court.

The delay is especially regrettable because the

IACC’s brief brings relevant and salient issues to the

Court’s attention, issues that are not addressed in the

writ petition. The IACC’s mission is the protection of

intellectual property. As its name declares, however, the

IACC approaches the Ninth Circuit’s decision from an

enforcement perspective that transcends the interests of

the parties to this dispute. It views the Ninth Circuit's

decision with particular alarm because the decision

erodes the effectiveness of the principal enforcement

mechanism available to those, like the IACC’s members,

who must protect their patents, trademarks, copyrights,

trade dress and trade secrets.

As explained in the brief, the Ninth Circuit’s decision

unnecessarily restricts the reach not only of the Lanham

Act, but also of the district court’s injunctive power.

Moreover, the Ninth Circuit reached its result by a pro-

cess that is itself unsound, confusing and in conflict with

other courts of appeals’ decisions as well as a host of

settled rules and principles. The attached brief explains

and demonstrates the conflicts and the confusion engen-

dered by the Ninth Circuit’s decision.

Accordingly, the IACC requests that the Court not

summarily reject the filing of the attached brief because

of the inadvertence of the IACC’s counsel, and that it

accept the brief and consider it on the important issues

presented by the petition for certiorari.

Respectfully submitted,

JoHN R. Reese*

Resecca A. LENABURG

FRANK B. KENNAMER

McCutTcHEN, DoyLe, BROWN

& ENERSEN

Three Embarcadero Center

San Francisco, California 94111

Telephone: (415) 393-2000

Attorneys for Amicus Curiae The

International AntiCounterfeiting

Coalition

*Counsel of Record

August 28, 1995

No. 95-85

+

In The

Supreme Court of the United States

October Term, 1995

REEBOK INTERNATIONAL LTD. and

REEBOK INTERNATIONAL LIMITED,

Petitioners,

Vv.

BANQUE INTERNATIONALE A LUXEMBOURG, S.A.,

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF OF AMICUS CURIAE IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI

i

TABLE OF CONTENTS

I. STATEMENT OF AMICUS CURIAE.......... 1

II. THE NINTH CIRCUIT’S DECISION IS A

BOON TO COUNTERFEITERS BECAUSE IT

EVISCERATES THE DISTRICT COURTS’

POWER TO ENFORCE THEIR INJUNCTIONS

AGAINST NONPARTY AIDERS AND ABET-

PEAEES 5 os RC pop BEC EK Lee Wika co hes Sca ies 2

Ill. THE NINTH CIRCUIT’S DECISION CON-

FLICTS WITH DECISIONS OF THIS COURT

AND OTHER COURTS OF APPEALS........ 8

A. Cases Enforcing Injunctions Outside The

BAPIROIS IMIR 6505 5 vise ois ote i as Rs Hd 8

B. Cases Enforcing Injunctions Against Non-

parties Outside The District Court’s Terri-

RONDE UTE NR s 5 eo 9

C. Cases Holding That Injunctions Are

Enforceable Without Registration........ 12

D. Cases Recognizing The Extraterritorial

Effect Of Legislative Decrees............ 14

E. Cases Following The Proper Analysis Of

CNN SUPONIO oo o6 ince os sicdn caw ikeyam cs 15

EV. SAPO MR MS deseo sb cca dus tack dcbees cine ee 18

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Burnham v. Superior Court of Cal., Marin County,

495 US. COG (IGNG) ee Se IS EES eas 9

California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974) ..... 5

In re Grand Jury Proceedings (United States v. Bank of

Nova Scotia), 691 F.2d 1384 (11th Cir. 1982), cert.

denied, 462 US... TLD (EGGS) ss 05 cbiewsviene a nkee passim

In re Grand Jury Proceedings (United States v. Bank of

Nova Scotia), 740 F.2d 817 (11th Cir. 1982), cert.

dented, 469 US. TIOG CISCO) yx cdcccs denne ia scnnsss 7,8

Leman v. Krentzler-Arnold Hinge Last Co., 284 U.S.

GOB CAG. isin kkvcecccecenceetekbaee cee ake ss 11

Playboy Enterpises, Inc. v. Baccarat Clothing Co., Inc.,

GO2.RAd TA72 COG Cie, DOU a ai 5 is oe scans 4

Reebok Int'l, Ltd. v. Marnatech Enters., 970 F.2d 552

(Stts Cie, BOGR) 6 ios eR NSN e eae ceer as 14

Regal Knitwear Co. v. NLRB, 324 U.S. 9 (1965) ....... 15

Stiller v. Hardman, 324 F.2d 626 (2d Cir. 1963)

a cine Seay LOM Eb oe Ub ae peda ee aes eee as cues OR ee > Re

United States v. Davis, 767 F.2d 1025 (2d Cir. 1985) ..... 8

United States v. First National City Bank, 379 U.S.

SFO EADS asin cock kcddcwednhaseue ast s bees eadeers cs 8

United States v. Paccione, 964 F.2d 1269 (2d Cir.

WORE cis oxvndues takes uke Wace robe beaks 10

United States v. Vetco, 691 F.2d 1281 (9th Cir. 1981),

cert. denied, 454 U.S. 1098 (1981).................. 17

Waffenschmidt v. Mackay, 763 F.2d 711 (5th Cir.

1985), cert. denied sub nom. Currey v. Waf-

fenschmidt, 474 U.S. 1056 (1986) ............... passim

iii

TABLE OF AUTHORITIES - Continued

STATUTES AND RULES

Se Sena BEER 6 oo oekaki on ocks le,

Sid i EC ee a a

OTHER AUTHORITIES

Fact Sheet, The IACC Update (The International

AntiCounterfeiting Coalition, Inc., Washington

SOS SPE pa obs nag eet fora nee Ryle a rae aa aan

Investors Chronicle, June 24, 1994, available in

LEXIS, Nexis Library, File ARCNWS...............

John Bliss, Counterfeiting In The Information Age: A

Global Threat To Intellectual Property Protection,

Legal Backgrounder (Washington Legal Foun-

dation, Washington D.C.), August 12, 1943.........

3 J. Thomas McCarthy, McCarthy on Trademarks and

Unfair Competition, § 25.01[5][a] (3rd ed. 1992)

Restatement (Third) of the Foreign Relations Law of

the United States § 421(2)(j) (1987).................

Restatement (Third) of the Foreign Relations Law of

the United States § 415, Comment h (1987) ........

Restatement (Third) of the Foreign Relations Law of

the United States, § 431(1) (1987) ..................

Thomson's International Banking Regulator, October

12, 1992, available in Westlaw, 1994 WL 8377720

World Intellectual Property Organization, Back-

ground Reading Material On Intellectual Property,

| eee rer oe reer rr ey

Amicus curiae The International AntiCounterfeiting

Coalition (“IACC”) respectfully submits this brief in sup-

port of the petition for writ of certiorari (the “petition”)

submitted by Reebok International Limited and Reebok

International Ltd. (collectively “Reebok”). The petition

raises important and timely questions of the reach and

effect of a federal court’s injunctive power. The Ninth

Circuit’s decision unduly restricts this power, conflicts

with principles applied by other circuits, and creates

confusion in an area that now more than ever requires

clarity. Accordingly, the IACC joins Reebok in asking the

Court to review the Ninth Circuit’s decision.

I. STATEMENT OF AMICUS CURIAE

The IACC is an organization founded to promote the

protection of intellectual property on a worldwide basis

through the use of legislation, law enforcement and pre-

ventive actions. This protection extends to patents, trade-

marks, copyrights, trade dress and trade secrets. The

IACC’s members include manufacturers, associations,

product security companies, investigators and attorneys.!

* Amicus’s members include companies with technology

and intellectual property related trade secrets. Amicus confines

its support to Reebok’s position that a district court has per-

sonal jurisdiction over nonparty “aiders and abettors” to punish

them for violating an injunction when the contumacious acts

occur outside the United States. No member by joining in and

concurring with this brief waives any right or any position it

may take or has taken with respect to any past or future issue or

litigation, or makes any representation of agreement or dis-

agreement with the position of any other member concerning

any other issue or litigation. The position of each member is

The touchstone of the IACC’s mission is to combat

counterfeiting and piracy by promoting laws, regulations

and directives designed to render theft of intellectual

property undesirable and unprofitable. It also provides

information and training in counterfeit product identi-

fication and in the methods of product security to prevent

successful abuse of its members’ intellectual property

rights. Critical to the IACC’s purpose is the belief of its

members that acts of counterfeiting and piracy can and

do cause severe health risks, safety hazards and economic

harm. The IACC both initiates actions and supports gov-

ernment actions that will lead to the prosecution of intel-~

lectual property infringers.

Il. THE NINTH CIRCUIT’S DECISION IS A BOON

TO COUNTERFEITERS BECAUSE IT EVISCER-

ATES THE DISTRICT COURTS’ POWER TO

ENFORCE THEIR INJUNCTIONS AGAINST

NONPARTY AIDERS AND ABETTORS

The Ninth Circuit’s decision is bad law, but undoubt-

edly good news for wrongdoers, particularly interna-

tional counterfeiters. It subverts the injunctive reach of

the district courts over nonparty aiders and abettors and

creates a virtual road map for counterfeiters to place their

unlawful gains beyond the reach of the courts. Defendant

Byron McLaughlin (“McLaughlin”) may be subject to con-

tempt, but that was no impediment to wrongly obtaining

his millions. This leaves Reebok to bear both the loss and

limited to the facts and issues set forth in this brief, and no

member by joining in and concurring with this brief takes any

position on any issue in this petition which is not addressed

herein.

the nearly insurmountable task of attempting to recover

them from a defendant who has fled the United States

and hidden his ill-gotten gains. Meanwhile Banque Inter-

nationale a Luxembourg (“BIL”), which was served and

which acknowledged the injunction in the United States

at its New York office, but nevertheless defied the court’s

order by doing “everything it could to ensure that

McLaughlin was able to remove his funds from the bank”

(App. 31a), cries foul at being called to account for its

contempt. And the Ninth Circuit obliges it. In doing so,

this case has been elevated from a private dispute

between one intellectual property owner and its latest

intentional infringer, to a decision which, as discussed

below, implicates principles that affect all intellectual

property owners’ ability to combat piracy. This is no

small problem.

Product counterfeiting is a huge national and inter-

national problem.? The quantity, quality and value cof

counterfeited goods increases each year as globalized

markets facilitate the movement of goods both legitimate

and counterfeit.> The money that follows and flows from

2 See, e.g., 3 J. Thomas McCarthy, McCarthy on Trademarks

and Unfair Competition, § 25.01[5][a] (3rd ed. 1992) (“[CJounter-

feiting is not confined to ‘luxury’ items and is widespread as to

a wide range of health and safety related items such as drugs,

fertilizers, chemicals, computer components, and auto and air-

craft parts. ... Counterfeiting is a worldwide phenomenon.”);

The World Intellectual Property Organization (WIPO), Back-

ground Reading Material On Intellectual Property, 176 (1988) (“The

pirating of trademarked products through commercial counter-

feiting has reached epidemic proportions in recent years.”).

3 See John Bliss, Counterfeiting In The Information Age: A

Global Threat To Intellectual Property Protection, Legal

counterfeited goods circulates electronically around the

world. Offshore banks, in places like Luxembourg, are the

repositories of choice for those who would break and

evade federal laws such as the Lanham Act. Congress

recognized these problems and the harm caused by coun-

terfeiting by including in the Lanham Act procedures

specially designed to combat them. See 15 U.S.C.

§ 1116(d) (seizure provisions). If defendants can enlist the

assistance of third party banks to avoid injunctions

granted to freeze their ill-gotten assets, Congress’

remedies will be frustrated and little will be done to “take

all economic incentive out of trademark infringement” as

the Ninth Circuit itself has previously directed. Playboy

Enterprises, Inc. v. Baccarat Clothing Co., Inc., 692 F.2d 1272,

1275 (9th Cir. 1982).4

Backgrounder (Washington Legal Foundation, Washington

D.C.), August 12, 1994, at 4 (“[T]he new Information Age and its

associated technologies present not only opportunities but also

a growing threat. . . . [T]he digitization of information permits

the perfect copying of information - from computer programs,

books, CDs, laser disks and video cassettes to apparel.”). See also

Fact Sheet, The [ACC Update (The International AntiCounter-

feiting Coalition, Inc., Washington D.C.) 1995 (“Between 1982

and 1988, world trade nearly doubled, growing from $3 trillion

to over $5 trillion. But U.S. trade revenue losses due to piracy

increased 1,100%, from $5.5 billion to $61 billion during that

same period. Currently, the IACC estimates the economic cost

due to product counterfeiting to exceed $200 billion each year.”)

4 “[L]uxembourg banking deposits are among the highest

in the offshore world. Only Switzerland . . . and the Cayman

Islands . . . outstrip Luxembourg.” Investors Chronicle, June 24,

1994, available in Westlaw, 1994 WL 8377720. In discussing the

failure of the Bank of Credit and Commerce International

(“BCCI”), a bank incorporated in Luxembourg, the Senate

Foreign Relations Subcommittee on Terrorism, Narcotics and

Given the increase in counterfeiting activity world-

wide, and the growing sophistication of counterfeiters in

their use of foreign bank accounts to store, launder and

secrete their gains, the district courts need the full consti-

tutional scope of their contempt power to prevent and

remedy the wrongdoing. The Ninth Circuit’s decision

hamstrings that power.

Moreover, the Ninth Circuit reaches this bad result

by a process that is itself unsound, confusing and in

conflict with other courts of appeals’ decisions. The court

effectively holds that an injunction is not enforceable by

contempt if the acts that violate it are done in a jurisdic-

tion whose law conflicts with the injunction. That broad

holding cannot be squared with numerous other courts of

appeals cases that have recognized that United States

decrees — both judicial and legislative - can apply to

conduct in a foreign country, and that comity is not blind

deference to foreign law and foreign courts. By failing to

International Operations issued a report in 1992 which found

that bank secrecy laws still prevent an adequate flow of

information to help regulators track banks’ international

operations, that too many offshore banking havens exist in the

Grand Caymans, the Bahamas, and the Channel Islands, among

others, and that lax regulation in jurisdictions like Luxembourg

contribute to the ability of banks like BCCI to perpetrate fraud

and manipulatior. Thomson's International Banking Regulator,

October 12, 1992, available in LEXIS, Nexis Library, File

ARCNWS. See also California Bankers Ass’n v. Shultz, 416 U.S. 21,

27 (1974) (recognizing concern about “serious and widespread

use of foreign financial institutions, located in jurisdictions with

strict laws of secrecy as to bank activity, for the purpose of

violating or evading domestic, criminal, tax and regulatory

enactments.”).

limit comity to its proper role, the Ninth Circuit decision

creates confusion and uncertainty that serves no end but

to aid wrongdoers.

Indeed, the decision is even more problematic. Given

the Ninth Circuit’s preoccupation with whether the

injunction was “registered” in Luxembourg, and whether

the release of funds was permitted or required by Lux-

embourg law, McLaughlin himself could have avoided

contempt sanctions by claiming to be under conflicting

commands from two tribunals despite the court’s finding

by clear and convincing evidence that he had knowingly

violated the injunction. In other words, the Ninth Cir-

cuit’s decision appears to create a right not to comply

with an injunction regardless of jurisdiction. That result is

obviously wrong and unacceptable. That in itself requires

this Court’s attention.

There is more. The Ninth Circuit’s decision conflicts

with a host of other settled rules and principles:

First, it undermines the force of Rule 65, which speci-

fically makes a federal court injunction binding on non-

parties “in active concert or participation” with the

defendant. The Ninth Circuit’s refusal to give effect to

this provision directly conflicts with the Fifth Circuit’s

decision in Waffenschmidt v. Mackay, 763 F.2d 711 (5th Cir.

1985), cert. denied sub nom. Currey v. Waffenschmidt, 474

U.S. 1056 (1986). This Court should resolve the conflict.

Second, the decision imposes an impossible and

unnecessary condition on the vitality of injunctive power

— that an injunction need not be honored unless it is

“registered” wherever defendants and their aiders and

abettors choose to act. This holding conflicts with the

rs

Second Circuit’s decision in Stiller v. Hardman, 324 F.2d

626 (2d Cir. 1963). The Ninth Circuit’s approach is not the

law in the United States and it should not be the law

when applied to Luxembourg or any other foreign coun-

try. If it is to be the law when applied outside the United

States, this Court should say so and, again, provide a

coherent rationale.

Third, the decision gives less force to judicial injunc-

tions than to legislative enactments without explanation.

Congress has the power to reach acts done in foreign

countries by foreign nationals that have substantial

effects in the United States. Many cases say so. A court’s

power to enforce its own injunction should be subject to

the same analysis. If not, a coherent explanation from this

Court is needed.

Finally, the decision fails properly to apply the prin-

ciple of comity, by ignoring the balancing test that has

been consistently applied in similar cases. E.g., In re

Grand Jury Proceedings (United States v. Bank of Nova

Scotia), 691 F.2d 1384 (11th Cir. 1982), cert. denied, 462 U.S.

1119 (1983). Instead, the Ninth Circuit simply put its

thumb on the scale and held that deference to foreign law

outweighs all. The Court should grant the petition to

eliminate the conflict and to reaffirm the principles that

govern such cases.

Clear signposts are needed to instruct lower federal

courts as to the permissible scope and reach of injunctive

decrees under Rule 65(d). The Court should grant

Reebok’s petition.

III. THE NINTH CIRCUIT’S DECISION CONFLICTS

WITH DECISIONS OF THIS COURT AND

OTHER COURTS OF APPEALS

A. Cases Enforcing Injunctions Outside The

United States

This Court and other courts of appeals have squarely

held that a district court may enjoin activities in a foreign

country. See, e.g., United States v. First National City Bank,

379 U.S. 378, 384 (1965) (“district court has the authority

to order [party before it] to ‘freeze property’ under its

control, whether the property be within or without the

United States”); United States v. Davis, 767 F.2d 1025, 1038

(2d Cir. 1985) (“well-settled that a federal court has the

power to enjoin a party before it from pursuing litigation

before a foreign tribunal”); In re Grand Jury Proceedings

(United States v. Bank of Nova Scotia), supra, 691 F.2d 1384

(affirming contempt order against Canadian bank for fail-

ure to produce documents at its Bahamas branch notwith-

standing that compliance would require the bank to

violate Bahamian law).

On its face, the Ninth Circuit’s decision is in direct

conflict with these holdings. The court’s attempt to dis-

tinguish the Bank of Nova Scotia cases as “concerning the

failure of a foreign bank with United States branches to

comply with a federal district court’s orders” (App. 53a,

n.5) is simply wrong. BIL, too, has a United States office

(App. 2a), a fact that the Ninth Circuit inexplicably

ignores.>

5 BIL obviously conducts business in New York, otherwise

what reason could there be for its office? Even if, as the Ninth

Moreover, under the Ninth Circuit’s analysis, the

presence or absence of a United States branch is irrele-

vant. If, as the court holds, a conflicting foreign law or

order is sufficient by itself to allow BIL to avoid compli-

ance with a United States injunction, what difference

does it make that it has a branch in the United States?

Certainly, the Ninth Circuit’s decision does not explain it.

B. Cases Enforcing Injunctions Against Nonpar-

ties Outside The District Court’s Territorial

Jurisdiction

Rule 65(d) of the Federal Rules of Civil Procedure

makes an injunction binding “upon those persons in

active concert or participation with” the defendant — that

is, nonparty aiders and abettors over whom the court has

not acquired personal jurisdiction. If a court had personal

jurisdiction over potential aiders and abettors, it could

bind them directly; Rule 65(d) would be superfluous.

Circuit assumes, an injunction has only nationwide scope, BIL is

present in the United States. Indeed it advertises that presence

(CR 192), and its New York office was served with the injunc-

tion. See Burnham v. Superior Court of Cal., Marin County, 495 U.S.

604, 619 (1990) (Valid predicate for personal jurisdiction is that

defendant was personally served while present in the forum

state). Burnham suggests that the Ninth Circuit was wrong in

reviewing the assertion of personal jurisdiction over BIL solely

as a question of contacts (App. 52a), because “jurisdiction based

on physical presence alone constitutes due process. . . . ” 495

U.S. at 619. If BIL’s presence, advertising and knowledge of

service of the injunction are not enough to bind it (or do not

bind it), how is one to know how to enforce an injunction?

10

The Fifth Circuit recognized the effect of Rule 65(d)

in Waffenschmidt v. Mackay, supra, 763 F.2d 711. Speci-

fically, the court held that nonparties who reside outside

the territorial jurisdiction of a district court may be sub-

ject to that court’s contempt power if, with actual notice

of the court’s order, they actively aid and abet a party in

violating it. Id. at 714. The court explained that the dis-

trict court had “inherent authority to enforce its own

injunctive decrees,” Id. at 716, and that Rule 65(d) “could

easily be thwarted if a court could only enforce its injunc-

tions over nonparty aiders and abettors who resided

within the court’s territory.” Id. at 717. Moreover, the

contemnors’ conduct with respect to the court’s order

was itself sufficient to confer personal jurisdiction under

the traditional “minimum contacts” standard: they dissi-

pated assets outside *he forum knowing they were subject

to marshaling within the forum, and therefore they could

foresee being haled into court in the forum. Id. at 723.°

That is so here. In addition to BIL’s advertised pres-

ence in the United States, BIL was personally served with

the injunction both at its New York office and its office in

Luxembourg. It knew that McLaughlin’s assets were

restrained, yet it “assisted McLaughlin in creating and

6 The Second Circuit has articulated a similar position. In

United States v. Paccione, 964 F.2d 1269 (2d Cir. 1992), the court

held that a nonparty was subject to a contempt order for violat-

ing a restraining order of which he had notice. In Paccione, as

here, the nonparty had “interfered with the res, the disposition

of which the district court had specifically restricted.” Id. at

1275. The court noted that it had the power to bind nonparties to

the terms of an injunction “to preserve its ability to render a

judgment in a case over which it has jurisdiction.” Ibid.

11

devising a scheme that would allow McLaughlin to get

around the court order” (App. 28a) and did “everything it

could to ensure that McLaughlin was able to remove his

funds from the bank.” (App. 31a) McLaughlin’s actions

are a paradigm of how a defendant can enlist the aid of

cooperative nonparties like BIL to frustrate a district

court’s order. By finding a bank in a jurisdiction that will

not honor a United States court injunction, counterfeiters

can protect and keep their ill-gotten gains. BIL’s actions

exemplify the very reason for Rule 65(d).

The decision below cannot be squared with Waf-

fenschmidt. The court tried to explain away the apparent

conflict by saying that Waffenschmidt turned on the

“ ‘simple fact that the mandate of a injunction issued by a

federal district court runs nationwide.’ ” (App. 54a) But

the same is true here. BIL was served with the nationwide

order in New York.

The difference, if any, is that the only tangible evi-

dence of BIL’s acts assisting McLaughlin to defy the

injunction occurred outside the United States, in Lux-

embourg. This difference is not dispositive. In fact, the

Ninth Circuit has confused the fact of a violation with its

location, and treated an intangible account in a multina-

tional bank as if it were tangible property with a fixed

location in Luxembourg. This is plain analytical error. See

Leman v. Krentzler-Arnold Hinge Last Co., 284 U.S. 448, 452

(1932) (“the contempt lay in the fact, not in the place of

the disobedience to the requirement”); Stiller v. Hardman,

supra, 324 F.2d at 628 (“[v]iolation of an injunctive order

is cognizable in the court which issued the injunction

12

regardless of where the violation occurred”). By empha-

sizing the place of the violation, the court simply ignores

the fact that it occurred. Indeed, the court makes the

place of the violation dispositive of whether it occurred at

all. This upside down approach begs the question and is

clearly wrong.

The conflict between the Ninth Circuit’s decision and

Waffenschmidt presents an important question on the

enforcement of district court injunctions. This Court

should review the question and resolve the conflict.

C. Cases Holding That Injunctions Are Enforce-

able Without Registration

The Ninth Circuit’s preoccupation with the place of

the violation led it to another error that conflicts with

established law. The court holds that BIL was not bound

to respect the injunction because it was not registered in

Luxembourg. But an injunction cannot be registered in

Luxembourg.” Thus, under the Ninth Circuit’s analysis,

the prospect of binding BIL, despite its notice of the terms

of the injunction, despite its office in New York, and

despite its obvious assistance of McLaughlin, was illu-

sory.

The Ninth Circuit’s approach is legally wrong, as

well as unrealistic. An injunction need not be registered

to bind nonparties. As the Second Circuit held in Stiller v.

Hardman, supra:

7 The Ninth Circuit knew the injunction was not enforce-

able under Luxembourg procedure. (App. 56a)

13

Violation of an injunctive order is cogniza-

ble in the court which issued the injunction,

regardless of where the violation occurred

. . . . [T]he Ohio district court had power to

punish a violative infringement though the

infringement took place in New York. There is

therefore no such need for registration of injunc-

tive orders as there is for registration of money

judgments.

324 F.2d at 628. See also Waffenschmidt, supra, 763 F.2d at

721.

Again the Ninth Circuit’s decision is in square con-

flict with the decision of another court of appeal, and

again the Ninth Circuit got it wrong. Since an injunction

need not be registered in the United States, there is no

reason to make it the sine qua non of injunctive vitality in

a foreign country.§

® Although the Ninth Circuit ultimately expresses its conclu-

sion in terms of lack of personal jurisdiction over BIL (App. 50a,

61a), its actual analysis makes personal jurisdiction irrelevant.

The factors upon which the Ninth Circuit relied to find that BIL

was not obliged to abide by the injunction — failure to register and

a conflicting command from a foreign court — would exist inde-

pendently of personal jurisdiction. Thus, under the Ninth Cir-

cuit’s analysis, BIL was either free to disregard the injunction

despite the existence of personal jurisdiction or bound to obey it

despite its supposed infirmity in Luxembourg. If BIL were free to

disregard the injunction, then personal jurisdiction is irrelevant.

If BIL were bound to obey it, then the lack of registration and the

conflicting command of the Luxembourg court cannot be relevant

in determining whether the district court had the power to

enforce its injunction. These considerations come into play,

rather, when the court determines whether it should, consistent

with principles of comity, enforce the violation of its injunction

through a contempt order. See Section E, below.

14

D. Cases Recognizing The Extraterritorial Effect

Of Legislative Decrees

Congress has long exercised the power to prescribe

rules of law concerning conduct outside the United States

that has or is intended to have a substantial effect within

the United States. Many decisions of this Court have

explicitly recognized this power. (Pet. 12, n.13) Indeed,

the statute on which the underlying case here is based,

the Lanham Act, applies to acts in a foreign country, as

the Ninth Circuit itself recognized. (App. 51a, citing

Reebok Int'l, Ltd. v. Marnatech Enters., 970 F.2d 552, 554-57

(9th Cir. 1992))

A judicial decree can also be an exercise of prescrip-

tive jurisdiction. For example:

Antitrust enforcement often involves not only

findings of violation and assessment of dam-

ages, but also judicial decrees prescribing or

enjoining future conduct. . . . Though such

orders are issued by courts in exercise of equity

powers, they are in a real sense a second exer-

cise of jurisdiction to prescribe. For purposes of

international law they are subject to the same

constraints and require the same evaluations

under §§ 402 and 403 as the initial determina-

tion by Congress to apply United States law.

Restatement (Third) of the Foreign Relations Law of the

United States § 415, Comment h (1987).

The same is true of the district court’s injunction in

this case, yet the Ninth Circuit does not discuss the

matter. Thus, while the underlying legislative proscrip-

tion applies outside the United States, the Ninth Circuit

holds that the judicial power to remedy violations does

15

not. The result is an unwarranted curtailment of judicial

power, and the creation of an arbitrary, unexplained dis-

tinction between legislative and judicial power.? There is

no principled basis for this distinction. The point is obvi-

ously important, and this Court should grant certiorari to

address it.

E. Cases Following The Proper Analysis of Com-

ity Principles

The Ninth Circuit made the existence of conflicting

foreign law dispositive. In effect, Luxembourg law was a

per se defense to the charge of contempt for deliberately

aiding and abetting violations of a United States district

court injunction. The Ninth Circuit’s per se approach is

inconsistent with the proper, and previously settled,

approach to resolving issues implicating interests of for-

eign states.

Rule 65(d) ensures that a party “may not nullify a

decree by carrying out prohibited acts through aiders and

abettors.” Regal Knitwear Co. v. NLRB, 324 U.S. 9, 14

(1965). This power, in turn, is not nullified, though it may

be restrained, because the activities occur in a foreign

country and ostensibly under command of foreign law.

The Eleventh Circuit, for example, has held that a district

® This sends entirely the wrong signal. The United States in

recent years has been heavily involved in seeking cooperation

abroad with its intellectual property laws. The Ninth Circuit's

decision effectively undermines this process. On the one hand,

the government is telling countries that they will be subject to

economic sanctions if they do not comply; on the other hand, the

Ninth Circuit is telling them that their laws are paramount.

16

court may properly compel a Canadian bank to produce

documents located at the bank’s Bahamas branch even

when compliance would subject the bank to criminal

sanctions in the Bahamas. In re Grand Jury Proceedings

(United States v. Bank of Nova Scotia), supra, 691 F.2d 1384:

See also In re Grand Jury Proceedings (United States v. Bank

of Nova Scotia), 740 F.2d 817 (11th Cir. 1984), cert. denied,

469 U.S. 1106 (1985). In the earlier of these cases, the

Eleventh Circuit first analyzed whether the district court

had the power, consistent with due process, to compel the

bank to violate the law of a foreign sovereign. 691 F.2d at

1389. Once satisfied that such power existed, the court

then weighed the applicable (Restatement) factors in

deciding whether the principle of comity required that

enforcement be denied. 691 F.2d at 1389-1391; 740 F.2d at

826-829. In both cases, the court concluded that the prin-

ciple of comity did not preclude enforcement of the sub-

poenas. 691 F.2d at 1391; 740 F.2d at 829.

Obviously, the result in those cases conflicts with the

result in this case. Equally important as the conflict in

results, however, is the conflict in the way the results

were reached. The Eleventh Circuit conducted a proper

analysis; the Ninth Circuit did not.

Whether the Luxembourg court’s order (or the lack of

registration) counseled against enforcement of the injunc-

tion required such analysis. Since the district court’s

injunctive decree was a proper exercise of its jurisdiction

to prescribe, it was entitled to “employ judicial

. measures to . . . punish noncompliance”!® when

10 Restatement (Third) of the Foreign Relations Law of the

United States, § 431(1) (1987).

17

BIL “carried on outside the state an activity having a

substantial, direct, and foreseeable effect within the

state,”1! i.e., when it knowingly assisted in the violation

of the injunction. At this point, the principle of comity

would be decisive in deciding whether to punish BIL’s

violation. The Ninth Circuit missed this analytical step.

The limitations now set forth in § 403 of the Restate-

ment (Third) form the basis of a balancing test that the

Ninth Circuit itself has employed in similar cases. See,

e.g., United States v. Vetco, 691 F.2d 1281 (9th Cir. 1981),

cert. denied, 454 U.S. 1098 (1981). In Vetco, the Ninth

Circuit held that a district court could enforce through

contempt and sanctions a summons issued by the Internal

Revenue Service to obtain records of Swiss subsidiaries of

Vetco, an American firm. Vetco argued it should be

excused from compliance because it would result in crim-

inal liability in Switzeriand. The court, in balancing the

Restatement factors to determine “whether foreign ille-

gality ought to preclude enforcement” of the summons,

held that the interest of the United States in enforcement

outweighed the contrary Swiss interest. Id. at 1291.

The Ninth Circuit should have applied that same test

here. Instead, it blindly deferred to Luxembourg law

without balancing the relevant factors. The Bank of Nova

Scotia cases and Vetco suggest that the Ninth Circuit

deferred to an unreasonable and inappropriate degree.

The Court should grant Reebok’s petition to clarify

the analysis and to reaffirm the principle that a conflict of

‘1 Rectatement (Third) of the Foreign Relations Law of the

United States § 421(2)(j) (1987).

18

laws is not an absolute bar to a court’s exercise of its

power.

IV. CONCLUSION

The Ninth Circuit’s decision conflicts in several sub-

stantial ways with decisions of this Court and other

courts of appeals. The issues are of vital importance to

the lower courts’ ability effectively to enforce their own

injunctions. That power is in turn vital to remedying and

preventing the use of off-shore banks as safe havens for

counterfeiters. Reebok’s petition should be granted.

August 28, 1995

Respectfully submitted,

JOHN R. Reese*

Resecca A. LENABURG

FRANK B. KENNAMER

McCutcHen, Doyte, BROwN

& ENERSEN

Three Embarcadero Center

San Francisco, California 94111

Telephone (415) 393-2000

Attorneys for Amicus Curiae

International AntiCounterfeiting

Coalition

*Counsel of Record

aeding